WARNING: That Coach Bag You Bought In Chinatown Could Be Funding A Terrorist Group

In the course of breaking down the money trail, Prabhakar followed around the Los Angeles Police Department and interviewed lawmakers, the FBI, the National Retail Federation and even some of the Kingpins themselves to understand what was going on.

Since it's so complicated, Prabhakar uses a hypothetical situation to explain how it works.

Let's say a woman named "Sally," from Atlanta, just lost her job, but she wants to have Carrie Bradshaw's style. But she can't really afford any designer bags since she's unemployed.

Then, Sally receives a phone call from someone in her neighborhood—"a hookup." This hookup tells her he has a designer Coach bag for $100—a huge markdown. But it's a stolen bag.

Sally can't resist the bargain.

So Sally gives the hook up her money. That person is functioning as a part of a bigger circle, so he doesn't pocket the entire amount—instead he takes about $40 of that money. Then, $60 goes back to the person who he initially got the handbags from. That person is the Kingpin. Let's call him "Sam."

In the hypothetical, Sam has minions working at department stores who are stealing designer bags, as well as minions selling those bags in New York, Atlanta, Miami and Los Angeles.

Sam's not just selling two or three handbags—he has several hundred handbags. Sam needs to store them somewhere, so he has a warehouse that functions as his headquarters. There, the people who sell to Sally and other woman come to pick up the bags.

Sam's warehouse also sell handbags to smaller stores, called shell stores, which serve as tourist destinations, and appear to be more legitimate than people hawking bags on the streets.

These shell stores look real, and sell real Michael Kors, Coach, and Ralph Lauren bags. And since it's a recession, women are thrilled with the discounts, Prabhakar explained.

"Sam"—the kingpin of the organized retail crime ring—needs a way to funnel that money out of the country. He uses accounts with fake names, American Express cards, and sometimes even Facebook and the application Square, Prabhakar said.

"In general what I found was Sam, who let's say is from Pakistan, still has ties back to his homeland and groups back home," said Prabhakar. "These groups are extremists to Americans and are really terrorists, but in Sam's country they are helping people, giving out aid after natural disasters or setting up schools."

So since Sam has affiliations with these groups, and wants to help his people, he sends the money from the stolen merchandise back home.

Said Prabhakar, "therefore, at the root, Sally is funding global terrorism."